Cash Central has several options available if you find you can’t repay your loan on time, and in some states one of those options may be a refinance.* How does a refinance work, and how does it affect your loan? The answer depends on which type of loan you have. Read on to learn more about refinancing a Cash Central loan.
Refinancing a Payday Loan
With a payday loan you receive your funds via direct deposit into your bank account, and your principal balance plus fees and interest are typically due in full on your next payday. When you refinance your payday loan you only pay the finance charges, plus any applicable fees or, as required in a few states, principal reduction payments, on your due date and the full remaining repayment amount is extended to a later date. Refinancing allows you to pay a lesser amount on your initial due date and gives you more time to pay the full loan amount. Refinancing of payday loans is allowed in half the states where Cash Central operates and note that multiple refinances are generally restricted.
How Refinancing Affects Your Payday Loan
While refinancing your payday loan will give you more time to pay your full loan amount, it will increase the overall cost of your loan as you will pay more in finances charges. Though you pay finance charges with your first loan payment, additional fees and/or interest accrue between the date of your first payment and your second. Depending on how many times you refinance your loan this can significantly increase the cost of your loan. If you choose to refinance your payday loan, we recommend you make a principal payment toward your loan even if not required to help reduce the overall finance charges.
Refinancing an Installment Loan
Refinancing an installment loan looks quite different from refinancing a payday loan. With an installment loan, you may find part-way through your loan you need additional funds for an unexpected expense, and a refinance of your current installment loan could provide that to you. When you refinance your installment loan, you’re approved for a new loan amount. Part of the new loan amount will go towards paying off your current loan, and anything you were approved for over that amount will be deposited into your bank account to use for what you need. For example, if your current loan’s payoff amount is $1,500 and you get approved for a $2,000 loan under your refinance, then $1500 will be used to pay off your current loan and you will receive the remaining $500.
How Refinancing Affects Your Installment Loan
As with a payday loan refinance, when you refinance your installment loan your original loan is paid off and you enter into a completely new loan agreement. This new installment contract is based on the total you were approved for, so with the example above repayment is on the entire $2,000. The new loan agreement may have different terms than the agreement from your first loan, including changes to the interest rate, repayment schedule, and loan term. As you are opening an entirely new loan and extending the final payoff date, you will almost certainly end up paying more than had you paid off your original loan in accordance with its repayment schedule. Cash Central recommends making additional payments towards your principal balance to reduce the amount of finance charges.
*Refinance options where allowed on Cash Central loans vary by state, so check out our Rates & Terms page or contact us for more information. If you would like to learn more about the differences between loans, our resource center offers more information on both payday loans and installment loans.